SINGAPORE- The dollar was on the back foot on Thursday, though it drew some support from higher US Treasury yields as traders contemplated the possibility of another rate hike by the US Federal Reserve, even if it pauses next week.
Surprise rate increases by the Bank of Canada (BoC) and the Reserve Bank of Australia (RBA) this week have caused markets to raise their expectations that global central banks still have further to go in their tightening cycle, while bets of rate cuts later this year have also trimmed.
The BoC on Wednesday hiked its overnight rate to a 22-year high of 4.75 percent after a four-month pause, while the RBA on Tuesday similarly raised interest rates by a quarter-point to an 11-year high and warned of more to come.
The Canadian dollar was last marginally higher at C$1.3363 to the greenback, after rising to a one-month top of C$1.3321 in the previous session.
“Canada’s central bank is viewed as one of the leaders when it comes to being proactive with monetary policy,” said Edward Moya, senior market analyst at OANDA.
“The BoC is signaling that more rate hikes could come and that has everyone rethinking that the Fed will be done after the July hike.”
Elsewhere, the US dollar dipped slightly in Asia trade, with sterling rising 0.13 percent to $1.2455, while the euro gained 0.14 percent to $1.0712.
European Central Bank policymakers had on Wednesday struck a hawkish tone and guided that more rate hikes are on the horizon, with interest rates likely to stay higher for longer.
Against the yen, the greenback slipped 0.28 percent to 139.76 with the Japanese currency buoyed by Thursday’s revised data showing Japan’s economy grew more than initially thought in January-March.
